Intersection tests for the cointegrating rank in dependent panel data

This paper takes a multiple testing perspective on the problem of determining the cointegrating rank in macroeconometric panel data with cross-sectional dependence. The testing procedure for a common rank among the panel units is based on Simes’ (1986) intersection test and requires only the p-values of suitable individual test statistics. A Monte Carlo study demonstrates that these simple tests are robust to cross-sectional dependence and have reasonable size and power properties. A multivariate version of Kendall’s tau is used to test an important assumption underlying Simes’ procedure for dependent statistics. The proposed method is illustrated by an empirical application.